By Matthew Herskowitz

Dr. Douglas Schottenstein manages pain for a living, but even he wasn’t equipped to allegedly be defrauded of hundreds of thousands of dollars by his own employees.

Schottenstein, the founder of NY Spine Medicine, a private medical practice he built on the promise of easing arthritic and joint pain, was one of the first administrators in the United States of a European pain treatment called Regenokine, which involves injecting patients’ own blood into their joints to relieve arthritic pain. Though the drug is not F.D.A.-approved for use in the United States, Schottenstein and other doctors are able to administer a generic version, sometimes to the tune of $15,000 a shot. Everyone from Pope John Paul II to Alex Rodriguez has tried Regenokine. Athletes such as former N.F.L. wide receiver Brandon Marshall specifically sought out Schottenstein to administer the medicine.

Schottenstein’s practice was not just running smoothly but booming, at least until he returned from the hospital and, as he claimed, found his Regenokine license suspended and hundreds of thousands of dollars missing from his coffers.

According to a source familiar with the case, doctors did lab work to determine the cause of his kidney failure and found ethylene glycol in his blood. They told him that he may have ingested a cleaning or automotive product such as anti-freeze or de-icer and suggested he look out for something he might have accidentally consumed at home. It wasn’t until December of that year, Schottenstein says, that he came across a bottle of anti-freeze in a storage closet in his medical office. The bottle, which had no medical purpose, was nearly empty.

Schottenstein’s suspicions quickly turned to legal action against those he had previously trusted most: his office manager Pearl Chan and medical assistant Derek Lee. According to a sprawling civil complaint and numerous court filings, Schottenstein believes that his employees masterminded a years-long campaign of fraud, forgery, and outright theft.

Bleeding Money

After his hospitalization, in early 2020, Schottenstein began to notice troubling irregularities in both his personal and business finances. According to his lawsuit, what he didn’t know was that a wire-fraud operation befitting Snatch had been unfolding right under his nose.

Schottenstein’s complaint claimed that without his knowledge or consent, Lee and Chan accessed a Citibank checking account he had opened under Thompson Real Estate LLC, which he used to pay the mortgage on his Manhattan town house. He also claimed that around the same time, Chan and Lee gained access to Schottenstein’s personal IberiaBank account. In their response to his complaint, Chan and Lee denied these allegations.

According to the lawsuit, Chan had secretly installed surveillance software called Refog and RemotePC on Schottenstein’s computer, allowing her to track his keystrokes and obtain his banking log-on credentials. Armed with this information, Lee allegedly called Citibank multiple times, impersonating Schottenstein and using partial Social Security numbers, security words, and other evasive tactics to bypass multi-factor authentication.

Schottenstein claimed that between February and March 2020, Lee successfully initiated several unauthorized wire transfers. According to his complaint, on February 20, $429,741.11 was wired from the Thompson Real Estate account to an account in Lee’s name at JPMorgan Chase. On February 27, $249,000 was transferred from the Iberia account into the Thompson account. On March 20, another $319,057.63 was moved from the Thompson account to Lee’s JPMorgan Chase account. Then, on August 28, 2020, $100,000 was deposited into the Iberia account, presumably to obscure prior theft. Schottenstein alleged that nearly $750,000 in total was siphoned from his accounts.

In their response to Schottenstein’s complaint, Chan and Lee denied having installed surveillance software, accessing his bank accounts without authorization, or transferring funds.

Furthermore, Chan and Lee allegedly redirected mortgage payments into their own personal accounts, causing Schottenstein’s Manhattan town house to slip into foreclosure. Schottenstein’s lawsuit claims Chan posed as a real attorney named Tracey Pearson and sent him reassuring e-mails, falsely stating that everything was under control and delaying Schottenstein’s discovery of the theft. Here’s an excerpt from one of the e-mails Schottenstein alleges that “Pearson” sent him.

“There is no foreclosure on 168 thompson and cenlar does not have the updated information because gallo is in charge of the loan at this time.… due to corona outbreak, there’s been more delays than we anticipated, but there is definitely no foreclosure on your townhouse and you do not owe any monies at this time.”

Schottenstein claimed that the full extent of the scheme became clear to him only in December 2020, when he realized he had been communicating with fake professionals for months. Chan and Lee, the doctor alleges, even went so far as to create a fictitious accountant named “Adam Dussberg,” who falsely told Schottenstein that his taxes were up-to-date. Schottenstein fired Chan in December after confronting her regarding the financial activity.

Schottenstein believes the scheme may have started soon after Chan and Lee were hired. Court filings describe the employees spending lavishly on company credit cards, even going so far as to open a dummy billing company to route payments from Schottenstein’s patients directly into their personal bank accounts.

In their response to Schottenstein’s complaint, Chan and Lee denied having impersonated Pearson or Dussberg, rerouting mortgage or patient payments, or misusing company credit cards. They also alleged that the doctor pressured Lee to engage in “illegal tasks” and that Schottenstein intentionally withheld money owed to them. “Dr. Schottenstein has never had anything other than a professional relationship with any employee,” his representative says. “In this day and age, who would stay in employment if they weren’t getting paid?”

After Schottenstein filed suit, Chan and Lee’s lawyer, Jeffrey Chabrowe, introduced a motion to pause the proceedings of the case. In it, Chabrowe included semi-nude photos of Schottenstein. “This was just another attempt to defame and discredit the doctor,” Schottenstein’s representative says.

“When Dr Schottenstein was released from the hospital after the poisoning (before he discovered the embezzlement) he took pictures of his surgical incisions which had developed a rash. Chan was his medical assistant. He shared non-nude photos of his kidney incisions and rash with her for her opinion,” says Schottenstein’s representative.

But Southern District Court judge Denise Cote sealed all the exhibits that included the photos. Nevertheless, Chabrowe reposted many of them in a later filing. The lawyer defended his actions by claiming the photos weren’t fully nude, weren’t subject to a protective order, and were relevant to his clients’ counterclaims.

Chabrowe declined a request for comment.

Judge Cote dismissed Chabrowe’s arguments, emphasizing the obligation of attorneys to protect privacy and act responsibly, especially in the Digital Age. Judge Cote also said that Chabrowe had no cause to release the photos except to try to sully the doctor’s reputation, and compelled him to pay a fine. According to an American Bar Association article, Chabrowe wrote in a letter to the judge that he was “not aware of any per se law or rule that precludes the filing of semi-nude photos.”

As for that near-empty bottle of anti-freeze? Schottenstein initially filed a police report claiming that it was part of an attempt to kill him. The anti-freeze remains just one of the many curiosities in this case. Schottenstein’s representative says, “The case is still open. However, as this took place during COVID it does seem that the case (like many others filed during that period) has gone cold.” A source close to Chan and Lee says the criminal case “did not have legs,” otherwise the Manhattan district attorney would not have declined to prosecute.

In their response to Schottenstein’s complaint, Chan and Lee denied poisoning him. More than a million dollars and years of litigation later, the two parties settled in March 2024, on the eve of trial, for a mere $20,000, which raises even more questions.

In a story that’s full of strange turns, one of the more unexpected may be that, though Schottenstein has cut ties with his two former employees, Chan and Lee are closer to each other than ever before. Since this saga commenced, they’ve gotten married, had two children, and moved to Texas.

One thing is for sure: Schottenstein’s trust has been corroded by the ordeal. “The greatest threat to your business isn’t outside your office, it’s sitting behind a desk with access to your systems,” he says through his representative. “Theft, whether it’s money, clients, or your reputation, is no longer done with paper trails, it’s done with keystrokes.""